Increase taxes on cigarettes and get tough with smugglers

Thu, Sep 13, 2012, 01:00

OPINION:YOU CAN say one thing for the tobacco industry. Despite the fortunes they spend trying to hijack public health policy and manipulate public opinion, at least they don’t pretend to care about those their products kill and maim. Profit matters, people don’t.

Once the industry is viewed through the prism of this wanton disregard for human life, it is difficult to fathom how anyone could fall for their self-serving propaganda. But time and again, well-meaning people do.

Tobacco companies know that to maintain profits, they must replace about 50 smokers every day in Ireland who either die, or manage to quit. Teenagers are the main target for this lethal treadmill.

Industry strategists and their PR gurus have seized upon Ireland’s tobacco smuggling problem as the best vehicle to meet this objective. Not out of any public-spirited abhorrence of criminality, clearly. But because they can use the issue to oppose tax increases that stop young people smoking and transfer vast sums from their coffers to the public purse.

Their tactics are simple: Exaggerate the extent of the problem and its impact on the retail trade; discredit proven research about the impact of tax on smoking; and peddle the ludicrous notion that legal cigarettes – which contain 4,000 chemicals including substances used in the manufacture of rat poison and rocket fuel – are somehow “healthier” than contraband.

In The Irish Times last week, Eugene Regan (Opinion Analysis, September 7th) takes up much of the industry agenda, in a piece that is frankly shocking in some of its misleading assertions. It gains no credibility from his blind preference for distorted industry statistics over infinitely more reliable Revenue figures. He even asserts that illicit cigarettes are of “particularly toxic quality”.

Does that mean legal cigarettes which kill more people than the next six biggest causes of preventable death put together, including alcohol, obesity and illegal drugs are not particularly toxic? But it is his central thesis that would be most dangerous if any policymaker was ill-informed enough to listen – that tax increases don’t reduce smoking and duty per pack of cigarettes should be cut by €5 to eliminate the illicit trade. All credible research, including by the World Bank and World Health Organisation, has shown that taxation is the biggest weapon in tobacco control, with a 10 per cent hike yielding roughly a 4 per cent decrease in smoking rates.

This was borne out just last Monday when it was revealed that a 22 per cent US tax increase imposed by President Barack Obama has resulted in three million fewer smokers and reduced the rate among teenagers by 10 per cent.

At home, Irish Heart Foundation research shows that a €1 increase per pack would result in 30,000 people quitting. It would be simplistic to reverse this calculation and conclude that a €5 cut would create 150,000 new smokers. But on the basis that tobacco kills one in two smokers, it’s not hard to imagine a death toll that would ultimately reach the tens of thousands.

Any tobacco tax cut must therefore be ruled out on health grounds alone. But there are other reasons why such a policy wouldn’t work. International agencies conclude that factors including weak enforcement and entrenched criminal networks are chiefly to blame for high smuggling rates. This is backed up by many examples of low-tax countries with high smuggling and high-tax countries with low contraband rates.

Studies here also show that smuggling levels – estimated at 14 per cent by Revenue – have remained stable during periods of major tax increases. And anyway, sacrificing the vast majority of tobacco revenue via a €5 tax cut to recover a relatively tiny portion of income makes no financial sense. But the real issue isn’t about reducing tax. It’s about the proven fact that you can use tax increases to deter young people from smoking and reduce smuggling rates at the same time. And about why that’s not happening in Ireland.

Our template for action is provided by the UK which had roughly the same smoking and smuggling rates a decade ago as we have now. By combining high regular tax increases, tough anti-smuggling measures and effective stop-smoking strategies, they now have two million fewer smokers, including a 50 per cent reduction among children, while the illicit market has fallen from 21 to 12 per cent. And for an annual outlay of £300 million, tax revenues have risen by £1.2 billion, whilst health service savings total £1.7 billion.

Tax increases alone can’t be fully effective because cheap smuggled tobacco blunts their impact. We must give Customs, which has lost hundreds of staff in recent years, and the similarly hard-pressed Garda, the manpower and equipment, along with the tough justice in the courts, required to deal with smuggling. And we must give greater support to free more smokers from the grip of addiction.

If such co-ordinated action is taken we can effectively tackle the health catastrophe that costs this country one of its citizens roughly every 90 minutes and massively increase tax revenue and cost savings for Ireland’s cash-starved health service.

Chris Macey is head of advocacy at the Irish Heart Foundation

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